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Pre-Budget Report Technical Issues

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Electric Cars & Vans

As with many of the recent statements Pre-budget 2009 includes some “green” policy elements. Until recently, there have been few electric cars and vans on the market and the uptake has been very low. PBR 2009 introduces a number of pro-electric policies to encourage businesses to reconsider.

Private use of company cars and vans has been growing ever more costly with the introduction of significant flat-rate benefit charges for vans and car benefits being linked to CO2 emissions with the bandings getting tighter and tighter so that all but the most economical cars carry a heavy tax burden.

In this climate the introduction of 100% first year allowance on expenditure on the purchase of new electric vans from April 2010 is an attractive proposition, as is the fact that there are no van or fuel benefits on private use of an electric van until April 2015. In addition to this the pre-budget statement confirmed that there will be no car or fuel benefit on electric cars until April 2015.

EMI share schemes

One of the measures not announced in the Pre-budget speech but released in the associated paperwork is a welcome change to the conditions for the EMI share option scheme. In order to comply with EU legislation, the requirement that the issuing company must be “wholly or mainly” trading in the UK has been relaxed. Instead the issuing company must have a permanent establishment in the UK

This opens up the EMI share option scheme to employees who didn’t qualify before.

R & D Tax Credit Scheme

Another welcome relaxation in the tax legislation relates to the SME R&D Tax Credit relief. In relation to expenditure incurred by an SME on qualifying R&D in accounting periods ending on or after 9 December 2009 the condition that any IP created by the R&D must be vested in the claimant company is abolished.

This opens the way for any SME company undertaking qualifying R&D activities to make a claim.

Pension changes

In Budget 2009, the Chancellor announced new measures to apply from April 2011 to restrict the higher-rate tax relief on pension contributions made by individuals with annual income of £150,000 or more. In addition so-called “anti-forestalling” legislation was introduced to prevent these higher-income individuals making larger than usual pension contributions between now and the introduction of the new rules.

Initially the anti-forestalling measures only applied to those with income of £150,000 or more. However, the recent pre-budget has tightened these measures so that they now apply to all those with income of £130,000 or more. In addition, HMRC has clarified that employer pension contributions will count towards the income threshold.